The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News – June 27, 2024
With the buyout of HighGold Mining, Contango ORE will add Johnson Tract to its portfolio of high-quality Alaska gold projects.
Gold being poured at Kinross Gold's Fort Knox mine near Fairbanks, Alaska. On July 8, Kinross and Contango ORE will pour the first gold bars from ore mined at Manh Choh.
Rick Van Nieuwenhuyse
Darwin Green
In an embrace of Contango ORE Inc.'s unique vision of transforming high-quality projects into Alaska's next gold mines, HighGold Mining Inc. shareholders nearly unanimously approved a deal to merge with the Alaska-based gold company.
During a special meeting held on June 27, 93.7% of HighGold shareholders approved the proposed merger with Contango.
Darwin Green
"We are very pleased to have this transaction overwhelmingly approved by our voting shareholders," said HighGold Mining President and CEO Darwin Green. "We sincerely believe that this is a win-win transaction, and that HighGold shareholders will benefit from participating in the beginning building blocks of a unique business model in the mining industry with a management team with demonstrated success."
Contango President and CEO Rick Van Nieuwenhuyse is pleased with the broad support for the merger from future shareholders.
Rick Van Nieuwenhuyse
"(W)e believe the combination of HighGold and Contango makes a tremendous amount of strategic sense," he said.
With the merger, HighGold's Johnson Tract gold project in Southcentral Alaska will join the pipeline of gold mine projects being advanced by Contango. This pipeline includes Manh Choh mine, which was developed under a joint venture with Kinross Gold Corp. and is on track to pour its first bar of gold on July 8, a day before the merger is expected to be finalized.
The coming gold production at Manh Choh reflects Contango's unique strategy of building a portfolio of high-quality gold assets in Alaska that can deliver direct shipping ore (DSO) to third-party mills for processing.
At Manh Choh, the company advanced a greenfield discovery to a high-grade deposit hosting 9.2 million metric tons of measured and indicated resources averaging 4.1 grams per metric ton (1.2 million ounces) gold and 14 g/t (4.2 million oz) silver.
Kinross, which acquired a 70% JV interest in Manh Choh, is processing the high-grade ore from this deposit through the mill at its Fort Knox Mine near Fairbanks, Alaska.
An average of around 225,000 oz of gold per year is expected to be produced from Manh Choh ore over the next 4.5 years. Contango's 30% share of this projected gold production would be 67,500 oz, which would result in $129.6 million per year in revenue and $54,270 in cash flow at an average gold price of $1,920/oz and all-in sustaining capital costs of $1,116/oz.
The first bars of gold from Manh Choh ore are scheduled to be poured on July 8.
Gold being poured at Kinross Gold's Fort Knox mine near Fairbanks, Alaska. On July 8, Kinross and Contango ORE will pour the first gold bars from ore mined at Manh Choh.
"This is indeed a grand milestone event for the company and its shareholders," said Van Nieuwenhuyse.
Contango is applying a similar strategy to Lucky Shot, a high-grade underground gold mine project 112 road miles north of Anchorage, Alaska.
According to a 2023 calculation, Lucky Shot hosts 226,963 metric tons of indicated resource averaging 14.5 g/t (105,620 oz) gold and 82,058 metric tons of inferred resource averaging 9.5 g/t (25,110 oz) gold.
Contango's next step at Lucky Shot is to expand the high-grade gold resource prior to mine planning. In preparation for this, the company has rehabilitated and expanded a historical underground mine tunnel at Lucky Shot to provide a platform for infill and expansion drilling of the high-grade resource.
Upon receiving all the customary approvals for the merger with HighGold, Contango will add Johnson Tract to its portfolio of high-quality Alaska gold projects.
"When combined with our Manh Choh and Lucky Shot projects, Johnson Tract represents the third leg of the stool for solid production growth," said Van Nieuwenhuyse.
Lying about 125 miles southwest of Anchorage, the 20,942-acre Johnson Tract property leased from Cook Inlet Region Inc., an Alaska Native regional corporation more commonly known as CIRI, hosts JT Deposit and a series of similar gold-rich volcanogenic massive sulfide (VMS) targets along a 7.5-mile-long corridor.
According to a 2022 calculation, JT Deposit hosts 3.49 million metric tons of indicated resource averaging 5.33 grams per metric ton (598,000 ounces) gold, 6 g/t (673,000 oz) silver, 5.21% (400.8 million pounds) zinc, 0.59% (43.1 million lb) copper, and 0.67% (51.5 million lb) lead.
Including the value of all the metals, this comes to 1.05 million oz gold-equivalent.
Drilling completed in 2022 and 2023 has outlined a significant zone of similar mineralization at Ellis, but a resource has not yet been calculated for this target about 2.5 miles (four kilometers) northwest of JT.
Contango plans to hit the ground running at Johnson Tract with a 2024 drill program aimed at collecting the information needed to develop a tunnel that will provide a platform for more detailed underground drilling of the JT Deposit.
"We are working closely with the HighGold team to commence a $3 million surface exploration drilling program this summer to complete 3,000 meters of core drilling focused on in-fill drilling the roughly 1-million-ounce Johnson Tract resource," said Van Nieuwenhuyse.
Much like Manh Choh, the plan for Johnson Tract is to send direct shipping ore from the project just a few miles from the Alaska coast to a third-party mill for processing.
"Contango now has a solid set of assets to become a significant Alaska gold producing company," said Van Nieuwenhuyse.
Contango closed a $15 million financing earlier this month to help fund the advancement of its Lucky Shot and soon-to-be Johnson Tract assets as it awaits revenues to begin flowing from Manh Choh.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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